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Stability of the money demand function in Asian developing countries

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  • Mohsen Bahmani-Oskooee
  • Hafez Rehman

Abstract

Previous studies that estimated the money demand function in Asian developing countries either employed traditional estimation techniques or recently popularized cointegration technique. While the first group suffers from 'spurious regression' problems, the second group interpreted their finding of cointegration as a sign of stability of estimated parameters. This study, after incorporating the CUSUM and CUSUMSQ tests into cointegration analysis, shows that in some Asian countries even though real M1 or M2 monetary aggregates are cointegrated with their determinants, the estimated parameters are unstable.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
  • Handle: RePEc:taf:applec:v:37:y:2005:i:7:p:773-792
    DOI: 10.1080/0003684042000337424
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